If you’ve read my blog you know that I am a big advocate of diversification in most things we do in life, especially our income streams.

Something BIG happened very recently that reminded me of the importance of diversification and further reinforced my perspective on why I believe we should establish multiple streams of income.

Uncertainty doesn’t knock on the door before paying us a visit. If you have a professional career as an employee, the pink slip can surprise you at any time. If you are a small business owner, a new legislation in your industry may make you unprofitable and force you to shut doors.

For someone like me who generates most of their income online, a minor tweak to the Google Panda update can bring my revenues down significantly overnight. One such event happened very recently that I’d like to share with you.

UNCONTROLLABLE CHANGES

On October 13/14th, the Google Search Engine team pushed an update that affected half the internet from what it initially appeared at least. Every blogger in the search and money niche was talking about the sky falling. I too was affected. Initially, only two of my niche websites were affected; ironically the two oldest and most established.

I posted a query immediately in the Yakezie forums to see if anyone else was in the sinking ship with me. Not surprisingly, others were too. A week later, 5 of my other niche websites tanked significantly. Here is a screen shot of one of my niche sites, which went from averaging 2,200 daily unique visitors to just over 1,000. That is a more than a 50% drop in search traffic.

Before I explain what happened and how it impacted me, it is important to cover some background information.

Of all the income streams I have established over the years, a big chunk comes from a portfolio of niche websites. Although each of my income streams have been subject to some volatility, or fluctuation, most have been generally very lucrative for me over the years. But what happened recently was the worst I have experienced and definitely worth discussing and getting your feedback on.

My portfolio of niche websites generate enough income for a family of five to live on more than comfortably. Because of such a large drop in traffic in several of my niche websites, I saw this income stream diminish more than 50% literally overnight.

I don’t want to get into why some of my sites tanked while others didn’t, and what I will eventually do about them, rather I want to focus on the importance of income diversity and what more than a 50% drop in one of my largest passive income sources means to me.

CONTROL WHAT YOU CAN, LET OF WHAT YOU CAN’T

After such a blow to the gut, I could sit and cried about it, worst yet go into depression, quit all materialism and banish into the forest like a monk. Alternatively, I can reflect on my experiences and make changes to attributes I can control to mitigate any potential adverse effect of such unpleasant surprises in life. I favor the later.

If you are earning your living online and are heavily reliant on search engines, it is critical to understand that we CANNOT control what the engines do, when they do it and how they do it. Even the best of the best SEO firms are perplexed and by default have turned into Occupy Google protesters.

The lesson learned here is that one must be diversified enough to sustain such hard blows every now and then as they are inevitable for many. In my personal case, having other niche websites helped, which were not affected by the Panda update. Owning other income producing assets also helped, which makes me less reliant on my income from niche websites.

But I can’t imagine what this could do to someone like Spencer Haws of Niche Pursuits who makes all his income from Adsense websites. While Spencer is just an example, the broader implication applies to anyone who relies on just one stream of income.

While there are measures one can take to prepare for such events, such as establishing an emergency fund, or living a minimalist lifestyle to keep expenses low, having an alternative source of income just has a completely different effects on one’s finances, psyche, emotions and even physical well being.

CONTINUE DIVERSIFYING THAT INCOME

It is exactly because of events like these that I continue to remain an advocate of income diversity. And although I favor passive income streams, this discussion is not about that. Whether passive or active, this discussion is about the effects that income diversification can have on an individual when times in certain trades or industries turn sour. There are just way too many externalities beyond our control, therefore we should try to influence those things that we CAN control.

Will I work hard to get those sites their ranks and profits back? You bet. I will work some. How much I don’t know. There always comes a point of diminishing returns, and it may be wiser to move forward and create more income streams with my limited time instead. The good news is that although Google has stung me very hard this time around, I am fortunate in knowing that the sting could have very well been a bullet.

I’m thinking what if niche websites are all I had and my income dropped 50% overnight? What if my consulting business is all I had and half my clients severed me due to budget cuts? What if I had a 9 to 5 job and had to take a 50% salary cut or got laid off. What would I fall back on? What would YOU do? Is income diversification important to you? As a busy professional, what do you see as the most conducive way for you to diversify your reliance on your primary stream of income?

Looking to learn how to start your own profitable website? Check out my step-by-step guide on how to start a blog. It’s one of the best things I did in 2009 to help earn extra money and break free from Corporate America!

Sunil is the author of ExtraMoneyBlog.com. He graduated from a top 10 business school with a Masters degree and holds several professional certifications. He established a healthy multi-six figure passive income stream in his spare time while maintaining a thriving career in Corporate America with a Fortune 100 company. He maintains a portfolio of profitable online and offline businesses and blogs about how successful individuals can expedite wealth building through multiple streams of active & passive income. You can connect with him on Facebook and on Google+

I’m on it – they are more guidelines than anything. SEOMOZ does a great job breaking it down nicely. These secrets are nothing we don’t already know – it’s really common sense more than anything. I feel the pendulum has swung too far and will eventually “normalize”. The question is when?

Any income I make online is considered ‘extra’. It doesn’t really factor into any critical budget needs. The reason being ties exactly to what you said, that if the income gets taken away, I wouldn’t want to put anything at risk. It’d be a major bummer but it wouldn’t put us in jeopardy in any way. That being said, it is key to diversify just so your risk of losing out gets minimized if you have multiple income streams.

Same with me, Money Beagle. my goal with my blog is to cover all my expenses. The rest of the money is banked. It is comforting to know I have a little extra there if i ever truly need it, but otherwise I simply live on my regular salary.

I understand the need for the updates from G but it’s crazy how many sites are hurt that have been playing by the rules. And there is still so much spam out there you have to wonder how much the updates really helped overall?

I know Glen – I was reading a popular blog and much of its readership who previously relied on online income is now having to go back to 9 to 5s to make up for the gap. I guess their lifestyles also crept up overtime which they now have to somehow sustain, or cut…

Wow, that sucks. Some of my niche sites have dropped too but not to the same extreme. I share your frustrations, but you have a great attitude so I’m sure you’ll rebound. I’m all about building new streams of income so I’m with you on that.

I feel your pain on this one Sunil, I lost half my traffic after the April 2011 Google update, literally overnight. To add salt to the wound, some of the spammer sites just copying my RSS feed ended up ranking higher than me for a lot of posts after the google update. So – yeah, color me skeptical as to whether it achieved all they had hoped.

Luckily I had already started diversifying my income to a degree, so while I lost a lot of money because of the drop, it wasn’t as catastrophic as it could have been. Of course, I will continue striving to improve my site and make changes in the hopes I can build back the traffic that I’ve lost. But I have a feeling it’s gonna be a long process.

I thought my site wasn’t hit until I compared the traffic and I saw a huge drop off around that time. However, I was also making the move to a new URL so I’m not sure how much that is affecting what I am seeing.
I think they are moving more towards social proof and FB shares, Tweets and +1’s are all going to factor into the ranking of the site.
There is no guaranteed income stream so the best plan is a diversified plan.

Sunil, That definitely sucks, it’s a good thing you’ve got so many things cooking at once.

I am very fortunate because I think I’m one of the few that actually saw an uptick in traffic since Panda hit. I know the big G typically provides 80% of search traffic, but did you notice any swings in your traffic from Bing, Yahoo, etc? Also, do you ever apply different strategies to target them or do you lump all your search engine strategies together?

I’m a big advocate of diversifying your income as well. Someone could have a “dependable job” and think that they’ll never be fired or laid off, but what if it happened? That’s 100% of you income gone.

My wife and I currently have 4 income sources and would plan to increase this number over time as well. In addition, we also live a very modest lifestyle so that if we only had income from one of the sources, we’d be just fine financially. But, the chances of this happening are far less than 1 job loss. Diversification is HUGE!

how do you have time to run 5 sites all at once? I tried to run another site but failed miserably and ended up quitting because of lack of effort and time committed to it. I already have a tough time maintaining this site alone. perhaps you can cover this topic of time management skills in your next post.

Charles, I discuss niche sites heavily on my blog, and how to set them and forget them. I build a new niche site only after I have done everything I could for the last one, which takes roughly 30-60 days at best.

Online income is subject to all the things you cannot control. When I owned a restaurant, I saw major employers move and things changed. There are no guarantees in life! You are right, diversify your income streams. You never know what will happen that may affect your income.

Great reminder… I was fortunate to see my SE traffic increase, though not to your levels. But you are absolutely right about diversification. I am truly sorry to hear about the hit to your niche sites though.

Wow, I’m sorry about the hit to your niche sites. I’m just starting to foray into the world of niche sites right now, so I’m very much in “learning” mode and don’t have much to contribute to the conversation. All I can say is that reading your post teaches me a lot about SE and niche sites, so thank you for taking the time to share it with this group.

You’re right. This is exactly why we need to have diversified income. I also think this is another reason why you should not quit your day job and become a full time blogger. I’m sure it can be done but there are just too many external events that are out of your control. But then again, I have heard many full time bloggers do extremely well with their passive income.

I agree with you for the most part. I will say however that for every successful full time blogger we hear about, there are several hundred / probably thousands of failures. Another point is that many say they make full time income, but for many full time means a meager 45k-70k. many Yakezie members make much more than that in their full time professions

Really? I’m surprised, it must be higher than that. The Canadian median (and medians are usually lower than averages cause of the skew effect) total household income across all census families was 68,410 in 2009. It must be 70ish now.

Of course we pay much more tax so it might work out to the same thing in the end. ;)

The way I look at it, is that if you can match your workplace income online, that is pretty sweet. If you’re already making a six-figure salary at your work, that will probably be more difficult to do.

I also see things as being a progression. Nothing you choose is permanent — if you decide to jump to full-time, maybe down the road you complete a graduate degree or you find new opportunities, and going back into the workforce at a much higher salary makes sense. All about maximizing your present and future.

Thanks for sharing this post, it is definitely insightful to learn more from the perspective of someone who has been there.

Yes in the US it is around the 48-49k ballpark. It was at the 50-51k range recently but it has declined since. This is a household figure (husband / wife combined). Making as much as your day job online is truly the dream. It becomes that much difficult leaving the man however overtime as you climb the ladder as money starts to come in a lot faster and easier. When I left Corporate America for the first time I was making six figures. It was easy for me to leave, but the thought of giving up something good that is “automatic” was a stickler for a while. Good point on progression – I agree.

Woah, I can swear I replied to this. My reply must have gotten lost. :(

In any case, the gist of what I was saying was:

If you have six figure, matching that might be harder. If not, then it would be really sweet to make that online. :) Also, it’s all about maximizing present & future — maybe one move you make now means you can re-enter the workforce at a much higher point later, based on the decisions that you make. I look at things and try to see if this is going to make things better or worse down the road.

Sorry for the double post — something weird is going on to the replies to Sunil’s “I do feel it is meager, but then again my perspective might be completely skewed seeing as the average household income in the United States is about $49k” comment. I thought my reply had been lost, but I saw it again (and the others, too) once I made a second reply. Does anyone else see this issue? Do you see any replies to that comment?

I am having issues with comments as well, both seeing them and making them. The way around this for me is to refresh the screen each time after an activity (a response, or a new comment) and give it a few seconds to soak in.

This is a such a great point Sunil – there are no guarantees. I’m working on diversifying my income stream. I don’t take any search engine traffic for granted – it could be here today and totally gone tomorrow….

Sunil, thanks for sharing, and I feel your pain. I saw a drop from the Arpil Panda update. The sad thing is that while I still make a full-time income, the uncertainty that Google has introduced into our business has forced me to keep my full time job. I had planned to quit in June, but with search results all over the place, I just didn’t feel I could. Diversity is the key, which makes multiple sites, email lists, and perhaps even PPC so important.

I am totally with you DG. Since you still have a full time job, if you don’t mind me asking, what do you define as full time income from your online activities? What percentage of your full time income from work would your definition of a full time income from online activities be?

how did you diversify prior to the job loss? cutting down is a good practice, but as we all know there is a floor after which it’s hard to get lower. all the best with your current search and entrepreneurship endeavors.

I really don’t know if my site was affected or not, it was hard to tell. However, diversifying income streams is a must for me. I don’t want to only rely on one source of income for the rest of my life.

Thanks for the great reminder. I was lucky and haven’t been affected by their recent updates. Thank goodness. I just count my lucky blessings each time this happens. I think that if I had a niche site, I wouldn’t have to worry as much.

Sunil, Thank you for the reminder. Although I don’t make much money on line (that’s good and bad :), it’s distressing to fnd that one metric can have such a huge impact on the income of so many online business people. I’ll be interested in a follow up of why this happened and what you are going to do about it!

Google is continuing to weed out poor/low quality websites. As a result, many “innocent” are impacted (collateral damage). It is my belief that the pendulum will swing the other way eventually and quality info sites will be rewarded.

My approach is a detailed site audit and corrective action where needed / possible. Other than that, move on and crank out more niche sites. It only takes me 90 days or less to fully build, market and monetize one so it’s not that big of a deal. Also, just because some sites tanked 50% in traffic in income doesn’t mean they are not making money. They still are making a few thousand dollars in passive income, which I am more than happy about and thankful for.

Wow, sorry to hear about that. I have a couple sites that were hit as well. I wasn’t making a ton of dough, so I’ve just kept going as if nothing happened, but it does stink especially when your first realize it. There may be light at the end of the tunnel; one of my sites, and I’ve heard of others, just naturally start moving back up in the rankings again. My hypothesis is that google is continually testing their changes and realized they made a mistake. i.e. viewer engagement, page views, time on site or whatever justified shifting some sites back up. It’s sad to see total crap on the front page of many searches I do though; they’ll get it right someday.

totally agree. the pendulum swings too far at times and it takes time before it comes back and eventually normalizes/stabilizes. have you disclosed any of your sites? I’d be interested in checking them out.

Great point! Risk’s diversification is essential in any field of endeavour. In trading, as an example, it is important to diversify among different industries (stocks, commodities, metals, currencies, oil, grains) geographic areas (America, Europe, Asia) and methods of trading (long term/short term, momentum/counter-trend, technical/fundamental).

This is all very interesting to me, as I am somewhat new to the blogosphere and am unclear about how to really take advantage of SEO. My current diversification plan for my primary income is… if I lose my current truck driving job, I’ll go get a different truck driving job tomorrow! My wife makes a decent secondary income by running an in-home daycare, which we could expand if need be. I am excited about learning how to properly run my blogs, eventually monetize them, and now I want to learn much more about these niche sites! Will definitely be reading more of your blog soon.

For all the talk about Google being a monopoly, I don’t think anyone was ever forced into using them as a search engine, and they are not even a complete monopoly in that space, though they are certainly far stronger than other players. I like the idea of competition and I want to see more in this space, but I also think that they’ve done lots of good and that they earned their position. The Internet is much better now that they’re around, even if as bloggers we are sometimes individually annoyed by some of their tactics. The mobile space is much better now that we have Android competing with iPhone and the others.

Let someone knock them out through legit competition, not through complaining to the government.

There has been a lot of good indeed, but don’t forget Google is run by human beings, not one but many. Somewhere at some point agendas clash and that impacts direction. Departments are so big yet decentralized that sometimes they all go in different directions. Google has come out and stated this themselves.

70% search engine market share and growing to me sounds like a monopoly. There are some hard facts that Google favors its own listings over others that are more “relevant”. Read the latest Yelp allegations and the backup/data gathered and provided by Yelp’s CEO. No one was/is forced to use Microsoft either, but do you like it when Explorer crashes your Gmail session in favor of a better MSN experience?

I stopped using Explorer a long time ago because it crashed at everything. ;) No company is perfect and I don’t doubt that some of these allegations may be true. As a blogger, I admit that Google rubs me the wrong way sometimes.

I’m just afraid that instead of trying to actually compete with a better product offering, other companies will just use the government to hobble Google to benefit themselves, instead. That is anti-competitive in my eyes.

This is also what you see companies try and try again in the mobile market. The software patent regime has gotten so ridiculous. Everyone infringes on everyone else, and the way that some companies “compete” these days is by suing and collecting money that way. It’s anti-competitive and rewards inferior companies and products. Microsoft, for one, is making $3-$6 per Android device in royalties. I’ve heard that they make more than Google themselves per device sold! (Though Google is raking it in on mobile ads).

I imagine that Microsoft and others are licking their chops and would love nothing more than to see Google fall, but I’d prefer to see it happen because they actually offered more value to the end user. Nothing is stopping someone else from coming out with a better search engine. Google was a nothing 10 years ago. Someone else can do it, too, they just have to come up with the right idea and execution. :)

totally, i too favor Google for many reasons. for one they pay me a good amount in adsense, i use a lot of their free apps…. yes at the end of the day we choose to go with who we go with, just wished things were more kosher

Thanks so much Sunil. I knew something was going on, and even read as much, but until I read your post today and reflected on my own numbers, I assumed it was something I didn’t do rather than the update itself. I think you’re killing it, and your optimism is infectious. Thanks so much for sharing.

Question for you then re: HTML similarity – because most blogs use the same template on every page, what is a good threshold in your opinion to be wary of. I hear 95%, but I have also heard that it really doesn’t matter as long as content is dissimilar.

While diversification is an axiom of investing, I am not sure whether the same can be said with developing a lot of long tail niche sites. Google’s algorithm changes have been numerous and relentless this year. Some bloggers who survived one wave of changes just to get dinged by another. The message that I have taken from what happened with Google traffic this year is that it is increasingly hard to cover a lot of niches and do it well. Instead, I think focus and interest are more important. If a blogger knows an area and cares about it, then it is easier to bounce back from any knock that Google hands you.

Great post. Google’s algorithm has definately changed a lot this year. I agree completely in diversifying your income, and diversifying your investments as well. It is very cliche but you really shouldn’t put all your eggs in one basket. I learned the hardway even through investing in stocks that not being able to diversify can cause big financial issues.

[…] Jeff at Sustainable Life Blog.“Diversify Your Traffic” by Eric at Narrow Bridge.“Income Crushed And Thousands Of Dollars Lost” by Sunil at Extra Money Blog.“Why You Can’t Blog Full-Time” by Sandy at […]

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